Board member Casteen on Wachovia: 'Talk to them'

UVA president John Casteen has sat on the Wachovia board since 2001.PHOTO BY LINDSAY BARNES

On Monday, September 29, the day banking giant Wachovia was in the depths of its monumental stock free-fall and then-pending sale to Citigroup, UVA president and company board member John Casteen was cutting the ribbon on a new dorm at his university. When the Hook asked if he had anything to say about the malaise of the bank he's paid to govern, his response was brief.

"It's very sad," Casteen said, "but you'll have to talk to them."

At that point, before the Hook could ask a follow-up, an aide said that Casteen "really has to go."

This day a year ago, Wachovia stock traded for $52.27 per share. When the market opened this morning, the stock's value had plummeted to $5.74. According to one analyst, board members like Casteen–- who earn six-figure sums for their board work–- can't completely wash their hands of this nosedive.

Wachovia was not always in such dire straits. Back in 1997, Wachovia was the picture of stability in the banking community, such that the two leading Virginia banks–- Richmond's Central Fidelity and Charlottesville's Jefferson National–- sought out Charlotte-based Wachovia to buy their respective companies.

Jefferson National shareholders, who are legion in Charlottesville, had reason to smile as the homegrown company was valued at $542 million, and they got paid with Wachovia stock.

Recent events do not sit well with O. Kenton McCartney, the last president of Jefferson National and the man who orchestrated its purchase by Wachovia, which he notes was then one of just two American banks with a AAA bond rating.

"I'm sad and angry about the whole financial situation," says McCartney. "Financial institutions forgot what they should be doing."

According to most analysts, Wachovia's trouble dates back to 2001, when it was purchased by First Union Corporation, and in an unconventional move, got to keep its name. The combined behemoth, by then the largest bank in the Southeast, continued devouring smaller banks. In May 2006, Wachovia finally ate one too many and began to get sick.

"The worst came when they acquired Golden West, a bank on the west coast, that had made a lot of exotic mortgages," says Hindman. "One of their offerings was called 'pick-a-payment,' where you could borrow from them and then basically choose what you wanted to pay them."

The acquisition was not without warning bells. "Even at the time," Hindman says, "many thought of this as a risky transaction."

The Wachovia board–- whose members earn annual compensation of $70,000 in cash and $150,000 in stock–- unanimously approved the Golden West deal put together by CEO and board chair Ken Thompson. So when the sub-prime mortgage crisis began to take down bank after bank earlier this year, Wachovia was not immune.

"Thompson even had to go public and say this was a bad move," says Hindman. "It blew up in their faces."

Finally, Thompson had to "retire at the request of the board" on June 2, though the board wished to make clear that there was "no single precipitating event" for Thompson's ouster. In a last-ditch effort to save the company, the board hired Robert Steel, former vice chair of Goldman Sachs and then-U.S. Treasury undersecretary, to fix the mess. Hindman says this proved to be too little too late.

"With all those bad assets," says Hindman, "I'm not sure anyone could have saved that company."

The fate of Wachovia hangs in limbo at the time of this story, as two other mega-banks–- New York's Citigroup and San Francisco's Wells Fargo–- slug it out in the courts over this once-big fish now reduced to minnow-hood.

So what does all this mean for Wachovia customers and stockholders?

"Those with accounts shouldn't have anything to worry about," says Hindman, "but if you were relying on Wachovia stock for your retirement, I hope you diversified before all this."

12 comments

Music Lover October 6th, 2008 | 1:33pm

Well, at least Casteen is spreading the incompetence around and not giving it all to the University of Virginia.

WestBerkeleyFlats October 6th, 2008 | 2:46pm

I don't think that anyone expects people such as Casteen to actually do anything on these boards. They're figureheads who perhaps show up for meetings and get a check. Casteen's background is in medieval literature, not finance.

zombie_hands October 6th, 2008 | 3:46pm

wow...Casteen gets a six figure income from Wachovia in addition to his salary at UVA. Must be nice to have a part time job like that!

Sick Of The Local Rambos October 6th, 2008 | 7:25pm

I'm just sick about all of this. Think of the children!

Clara October 6th, 2008 | 8:13pm

You mean, think of the UVA children, who are blown off on a daily basis by this insolent snob?

Sick Of The Local Rambos October 6th, 2008 | 9:24pm

Ohh, knock it off. I must have really gotten under your skin somehow if you have to keep duplicating my user name here.

Or perhaps you're one of the two that followed me all over the Internet, and I ended up with lible awards (plus interest) against both of you.

WestBerkeleyFlats October 7th, 2008 | 9:06am

How is it that someone has won not one, but two awards for libel, and yet still cannot spell the word?

SayItAintSoJoe October 7th, 2008 | 9:32am

Is this the same Casteen who supported the NO SIGN rule at Scott? Apparently his judgement has been wrong for some time.

WestBerkeleyFlats October 7th, 2008 | 9:40am

I believe that Casteen said that the sign thing was athletic department business.

He's just the university's president. He doesn't actually run things.

Rafaelo October 7th, 2008 | 12:08pm

Actually the Hook ought to check out ALL the prodigious perks at U. Va., not just bagfuls of free money flung at Casteen for make-believe supervision of a defunct bank. Casteen has a private jet--not merely a plane mind you but a large intercontinental jet. When he isn't using it he lets others. I saw the basketball coach get on alone, with two pilots to fly him, at the private aircraft terminal adjacent to Charlottesville airport, presumably to go recruit some gangly teenager. Does Casteen also have a helicopter? Does he fly it to a secret private retreat? Does he eat pearls for breakfast? The Hook should tell us so we can despise Casteen for getting so rich off what is supposed to be a nonprofit, charitable, educational institution. Of course I am perfectly happy to despise him without any need of supporting facts. I know the guy. Bilious and supercilious.

Dan1101 October 7th, 2008 | 2:43pm

I'll take his place on the Wachovia board.

wtf? October 8th, 2008 | 9:16am

I think we should take this guys pay plan and divide it by the actual numbers of decisions he makes for the University. I think the CEO salaries would be peanuts by comparison. This is a public school. Sad very sad.